Four more souvenir companies fined for misleading tourists

Four companies and four individuals have
been convicted and fined a total of $601,900 for selling
visiting Asian tourists a range of imported alpaca goods as
“Made in New Zealand”, and making claims that duvets
were 100% alpaca or merino wool when they were not.

This
is the second tranche of companies being sentenced for
breaches of the Fair Trading Act. In March two other
companies, Top Sky and Kiwi Wool, and two individuals were
convicted and fined a total of $259,000 for similar
breaches.

These charges resulted as part of a multi-agency
initiative involving the Commission, Police, Customs,
Immigration and Wildlife Enforcement Group, assisted by
Tourism New Zealand, where 10 premises in Rotorua and one in
Auckland had search warrants executed on them in August
2011.

Organised tour groups from China, Korea and Taiwan
were taken to several of the premises and were sold items
such as alpaca rugs, alpaca and merino duvets. Due to
misleading representations, the tourists paid significantly
more for these items than they were actually worth.

“The
Commerce Commission makes no apology for taking strong
action against companies that deliberately mislead consumers
in this way. The tourist market, and New Zealand’s
reputation for producing premium wool products must be
protected,” said Commerce Commission Chairman Dr Mark
Berry.

“When tourists come to our shores they must be
able to trust that what they are being told is true.
Re-labelling items as being made in New Zealand when they
are not, misleads buyers and can harm the New Zealand
tourism industry,” said Dr Berry.

The misrepresentations
were not only made on labels and in brochures but also
verbally by staff selling the goods. In one case tourists
were told the alpaca items came from ‘snow alpaca’ that
are ‘raised above the snow line in the South Island’. No
such animal exists.

The defendants were sentenced in the
Rotorua District Court after earlier admitting the breaches
of the Fair Trading Act, detailed below. In his reserved
judgement released yesterday, Judge Thomas said the untrue
representations about the origins of the Alpaca products and
contents of duvets were very important in the eyes of the
target market [tourist shopping tour market] and in
achieving sales at a high level and also at a higher price
than was merited.

He further described the conduct as “a
major fraud by any description” and “serious dishonest
offending at a high level”.

Hyeon Company
Limited

Charged with 30 breaches of the Fair Trading
Act, was fined $105,000 Imported alpaca rugs from
Peru, removed the ‘Made in Peru’ labels and replaced
them with ‘proudly hand made in New Zealand’ labels.
Hyeon wholesaled the rugs and contended that by
“servicing” the rugs on arrival from Peru (essentially
brushing, repairing and putting a backing on the rugs) this
meant the rugs were made in New Zealand. When these
rugs were retailed, the rugs sold for between $4,000 and
$8,000 each when Peruvian alpaca rugs sold elsewhere for
between $1,000 and $1,600 each.

Duvet 2000
Limited

Charged with 30 breaches of the Fair Trading
Act, was fined $200,000 Ordered alpaca rugs from Peru
via Hyeon Company Limited, and sold them with the Hyeon
applied ‘proudly hand made in New Zealand’ label even
though they knew they were imported. Manufactured and
sold duvets stating on the labels they were ‘100% pure
alpaca wool’ when the alpaca wool content was 20%.
Manufactured and sold duvets stating on the labels they were
‘100% New Zealand merino lamb wool’, when the wool was
not merino.

Mr Chae (Director of Hyeon and Duvet 2000)

Charged with 20 breaches of the Fair Trading Act and was
fined $24,500 Mr Chae was charged as a party to the
offending by each of his two companies (listed above).

JM
Wool Limited

Charged with 42 breaches of the Fair
Trading Act, was fined $182,000 Its Director Mr Jong
Myung Lee faced 40 charges and was fined $21,000 JM
Wool purchased alpaca rugs from Premium Alpaca New Zealand
Limited and Hyeon Company Limited and knew that these rugs
although labelled “made in New Zealand’ were imported
from Peru. JM Wool manufactured and sold woollen
duvets with labels stating they were ‘100% pure alpaca
wool’, but the alpaca wool content was only 20%.
Manufactured and sold duvets with labels stating they were
‘100% New Zealand merino lamb wool’, but the wool
content was not merino. Manufactured and sold duvets
labelled as ‘Southdown wool’ when the wool used did not
come from Southdown sheep.

Premium Alpaca New Zealand
Limited

Charged with 10 breaches of the Fair Trading
Act, was fined $56,000. Directors Mr Yun Duk Jung and
Mr Bo Sun Yoo each faced 10 charges and were fined $6,700
each. Premium Alpaca imported rugs from Peru, removed
‘Made in Peru’ labels and added ‘Made in New
Zealand’ labels. The company told the retailers they were
supplying that the rugs came from Peru.

There are two
further companies and one individual facing who have pleaded
guilty to charges as a result of the investigation and are
awaiting sentencing.

Background

The Fair Trading Act
1986 is designed to protect consumers and make competition
more effective. If competition is to be effective, consumers
need to be able to rely on the information provided by
companies about the goods and services they offer.

False or misleading representations can distort
competition and a competitive advantage can be gained by
using unfair methods. The Commission is responsible for
enforcing the Fair Trading Act. You can read more about the
Fair Trading Act and Country of Origin claims on our Place
of Origin Representations page
http://www.comcom.govt.nz/fair-trading/fair-trading-act-fact-sheets/place-of-origin-representations/.

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